RP v. CTA & Nielson & Co., G.R. 38540, Apr.

30, 1987

"The follow-up letter reiterating demand for payment could be considered a notice of assessment in itself
if duly received by the taxpayer."

FACTS: The petitioner sought the review on certiorari of the decision of the respondent Court of Appeals
reversing the decision of the then Court of First Instance of Manila which ordered private respondent
Nielson & Co., Inc. to pay the Government the amount of P11,496.00 as ad valorem tax, occupation fees,
additional residence tax and 25% surcharge for late payment, for the years 1949 to 1952. Petitioner claims
that the dema00nd letter of 16 July 1955 showed an imprint indicating that the original thereof was
released and mailed on 4 August 1955 by the Chief, Records Section of the Bureau of Internal Revenue,
and that the original letter was not returned to said Bureau; thus, said demand letter must be considered
to have been received by the private respondent. According to petitioner, if service is made by ordinary
mail, unless the actual date of receipt is shown, service is deemed complete and effective upon the
expiration of five (5) days after mailing. As the letter of demand dated 16 July 1955 was actually mailed
to private respondent, there arises the presumption that the letter was received by private respondent in
the absence of evidence to the contrary. More so, where private respondent did not offer any evidence,
except the self-serving testimony of its witness, that it had not received the original copy of the demand
letter dated 16 July 1955.

ISSUE: Was notice of assessment or demand properly served to the respondent? Should the receipt by
the respondent of the succeeding follow-up demand notices be construed as receipt of the original
demand?

HELD: As to the first issue, no. As correctly observed by the respondent court in its appealed decision,
while the contention of petitioner is correct that a mailed letter is deemed received by the addressee in
the ordinary course of mail, still this is merely a disputable presumption, subject to controversion, and a
direct denial of the receipt thereof shifts the burden upon the party favored by the presumption to prove
that the mailed letter was indeed received by the addressee. Since petitioner has not adduced proof that
private respondent had in fact received the demand letter of 16 July 1955, it can not be assumed that
private respondent received said letter. As to the second issue, Yes. Records show that petitioner
wrote private respondent a follow-up letter dated 19 September 1956, reiterating its demand for the
payment of taxes as originally demanded in petitioner's letter dated 16 July 1955. This follow-up letter is
considered a notice of assessment in itself which was duly received by private respondent in accordance
with its own admission. And consequently, under Section 7 of Republic Act No. 1125, the assessment is
appealable to the Court of Tax Appeals within thirty (30) days from receipt of the letter. The taxpayer's
failure to appeal in due time, as in the case at bar, makes the assessment in question final, executory and
demandable. Thus, private respondent is now barred from disputing the correctness of the assessment or
from invoking any defense that would reopen the question of its liability on the merits.
Collector v. Pedro Bautista and Dativa Tan, G.R. No. L-12250 & L-12259, May 27, 1959

Notice of Assessment deemed made when notice is released, mailed and does not require that notice be
received within 3 year period

With respect to prescription, the income tax returns of the Bautistas for 1947 are deemed filed as of
March 1, 1948. Section 331 of the Tax Code provides that the deficiency assessment must be made within
five years after the return was filed, and the assessment is deemed made when the notice to this effect is
released, mailed or sent by the Collector to the taxpayer, for the purpose of giving effect to said
assessment. Said section does not require that the notice be received by the taxpayer within the said
period of five years. In the case atbar, the Collector assessed the deficiency tax on January21, 1953 and
notice to this effect was sent or given due course prior to March 1, 1953, for it was received in the Office
of the City Treasurer of Quezon City, on February13, 1953, and, hence, before the expiration of said
period. As to the alleged fire losses disallowed by the court, suffice it to say that the question whether the
findings are corrector not depends upon the degree of credence attached to the testimonial evidence
introduced by the taxpayers, which hthe lower court was in a better position to decide. Finally, the
contention that the property was a capital asset, is untenable, in view of the findings of the lower court
that said property was primarily held by them for rent, and that they never occupied the same as their
residence
Republic vs Ricarte

Facts:

On March 2, 1959, defendant-appellee Francisco Ricarte filed his income tax return for the year 1958. On
April 6, 1959, the Office of the Collector of Internal Revenue made the corresponding assessment and
fixed at P222.00 the defendant's income tax liability pursuant to the express provision of Section 51(a) of
the National Internal Revenue Code (Commonwealth Act No. 466), then in effect

In the year 1961, the Bureau of Internal Revenue, after investigation, found that the defendant had a
deficiency of P 1,136.87 in his income tax for 1958. On January 19, 1961, assessment notice No. 17-A-
708424-58 for the amount aforestated was issued and, together with the corresponding audit sheet and
letter of demand, was mailed to the defendant on January 25, 1961.

For failure of defendant to pay his deficiency income tax liability, plaintiff, on January 14, 1966, filed a
complaint for collection of unpaid taxes before the City Court of Cebu

Issue: whether the appellant can still collect the alleged deficiency income tax liability thru judicial
proceeding.

Held:

Clearly, before the amendment, the taxpayer files his income tax return and the Collector (now
Commissioner) of Internal Revenue assesses the tax due and notifies the taxpayer thereof. On the other
hand, under the amendatory act, the taxpayer assesses himself, files his return and is required to pay the
tax as shown in his return upon filing thereof. This procedure is commonly known as the "pay-as-you-file"
system.

In other words, under the old law, the Collector of Internal Revenue was required to assess the
tax due, while under R.A. No. 2343 the taxpayer himself computes the tax on the basis of the figures
appearing in his income tax return.

WE do not agree with the former Court of First Instance of Cebu that the subsequent assessment made
on January 19, 1961 was based on the amendatory act.

Appellee filed his income tax return for the year 1958 on March 2, 1959 and the same was assessed by
the Bureau of Internal Revenue on April 6, 1959. The tax was paid in two installments. The Bureau of
Internal Revenue reviewed the said return and found out a deficiency in the assessment it previously
made and the income tax paid by the appellee. A notice of assessment was sent to the appellee on January
19, 1961. Such subsequent assessment undertaken by the Bureau of Internal Revenue was based merely
on the income tax return filed by the appellee where no assessment has been made by him. As has been
said, the amount of tax due was previously computed by the Bureau of Internal Revenue

Although a subsequent notice of assessment was allegedly made and sent to appellee on January 19,
1961, it was the finding both of the former City Court of Cebu and the defunct Court of First Instance of
Cebu that no evidence has been presented by the appellant that the appellee actually received a copy of
that assessment notice regarding the alleged deficiency tax. Such finding, being one of fact, can no longer
be reviewed by this Court
ADVERTISING ASSOCIATES, INC., , vs. COURT OF APPEALS and COMMISSIONER OF INTERNAL REVENUE,.

Facts:

Advertising Associates is being held liable for 3% Contractor’s percentage tax for rental income from the
lease of neon signs and billboards imposed by 1933 tax code on business agents and independent
contractors.

petitioner relies on the Collector's rulings dated September 12, 1960 and June 20, 1967 that it is neither
an independent contractor nor a business agent (Exh. G and H).

As already stated, it considers itself a media company, like a newspaper or a radio broadcasting company,
but not an advertising agency in spite of the purpose stated in its articles of incorporation. It argues that
its act of leasing its neon signs and billboards does not make it a business agent or an independent
contractor. It stresses that it is a mere lessor of neon signs and billboards and does not perform advertising
services.

Section 191 defines an independent contractor as including all persons whose activity consists essentially
of the sale of all kinds of services for a fee. Section 194(v) of the Tax Code defines a business agent as
including persons who conduct advertising agencies.

its business is limited to the making, construction and installation of billboards and electric signs and
making and printing of posters, signs, handbills, etc..It contends that it is a media company, not an
advertising company.

The Commissioner required Advertising Associates to pay P297,927.06 and P84,773.10 as contractor's tax
for 1967-1971 and 1972, respectively, including 25% surcharge (the latter amount includes interest) on its
income from billboards and neon signs.

The basis of the assessment is the fact that the taxpayer's articles of incorporation provide that its primary
purpose is to engage in general advertising business. Its income tax returns indicate that its business was
advertising

September 13 and November 21, 1974 – requested 2 letters of cancellation

March 31, 1978 - the Commissioner resorted to the summary remedy of issuing two warrants of distraint,
directing the collection enforcement division to levy on the taxpayer's personal properties as would be
sufficient to satisfy the deficiency taxes

May 23, 1979 - Acting Commissioner Efren I. Plana wrote a letter in answer to the requests of the taxpayer
for the cancellation of the assessments and the withdrawal of the warrants of distraint. He justified the
assessments by stating that the rental income of Advertising Associates from billboards and neon signs
constituted fees or compensation for its advertising services.

June 18, 1979 - Advertising Associates received that letter and Nineteen days later or on July 7, it filed its
petition for review. In its resolution of August 28, 1979, the Tax Court enjoined the enforcement of the
warrants of distraint.
CTA ruling - did not resolve the case on the merits. It ruled that the warrants of distraint were the
Commissioner's appealable decisions. Since Advertising Associates appealed from the decision of May 23,
1979, the petition for review was filed out of time. It was dismissed. The taxpayer appealed to this Court.

ISSUES:

1. WON petitioner is liable to pay deficiency tax.

2. WON the Petition was filed out of time

3. WON the right to collect already prescribed.

Held:

the undeniable fact is that neon signs and billboards are primarily designed for advertising. We hold that
the petitioner is a business agent and an independent contractor as contemplated in sections 191 and
194(v).

However, in view of the prior rulings that the taxpayer is not a business agent nor an independent
contractor and in view of the controversial nature of the deficiency assessments, the 25% surcharge
should be eliminated

petition for review was filed on time. The reviewable decision is that contained in Commissioner Plana's
letter of May 23, 1979 and not the warrants of distraint.

1977 Tax Code, Presidential Decree No. 1158, effective on June 3, 1977, provides that the tax may be
collected by distraint or levy or by a judicial proceeding begun "within five years after the assessment of
the tax".

The taxpayer received on June 18, 1973 and March 5, 1974 the deficiency assessments herein. The
warrants of distraint were served upon it on April 18 and May 25, 1978 or within five years after the
assessment of the tax. Obviously, the warrants were issued to interrupt the five-year prescriptive period.
Its enforcement was not implemented because of the pending protests of the taxpayer and its requests
for withdrawal of the warrants which were eventually resolved in Commissioner Plana's letter of May 23,
1979.

It should be noted that the Commissioner did not institute any judicial proceeding to collect the tax. He
relied on the warrants of distraint to interrupt the running of the statute of limitations. He gave the
taxpayer ample opportunity to contest the assessments but at the same time safeguarded the
Government's interest by means of the warrants of distraint.
CIR vs Union Shipping

Facts:

The CIR assessed Yee Fong Hong, Ltd the total sum of P583, 155.22, as deficiency income taxes due for
the years 1971 and 1972. Respondent Yee protested the assessment.

November 25, 1976 – the CIR, without ruling on the protest by Yee, issued a Warrant of Distraint and Levy,
which was served on private respondent's counsel.

November 27, 1976 – Yee reiterated its request for the reinvestigation of the assessment. However the
CIR, again, without acting on the request for reinvestigation and reconsideration of the Warrant of
Distraint and Levy, filed a collection suit before the CFI.

January 10, 1976 – Respondent filed its Petition for Review of the petitioner's assessment of its deficiency
income taxes in the Court of Tax Appeals.

According to the petitioner, the Court of Tax Appeals has no jurisdiction over this case. It claims that the
warrant of distraint and levy is proof of the finality of an assessment and is tantamount to an outright
denial of a motion for reconsideration of an assessment. Among others, petitioner contends that the
warrant was issued after the respondent filed a request for reconsideration of subject assessment, thus
constituting petitioner's final decision in the disputed assessments. Therefore, the period to appeal to the
CTA commenced from the receipt of the warrant on November 25, 1976 so that on January 10, 1976 when
respondent corporation sought redress, it has long become final and executory.

Issue:

Whether or not the CTA has jurisdiction over the case

Held.

The CTA has jurisdiction over the case. There is no dispute that petitioner did not rule on private
respondent's motion for reconsideration but left private respondent in the dark as to which action of the
Commissioner is the decision appealable to the CTA. Had he categorically stated that he denies private
respondent's motion for reconsideration and that his action constitutes his final determination on the
disputed assessment, private respondent without needless difficulty would have been able to determine
when his right to appeal accrues and the resulting confusion would have been avoided. Under the
circumstances, the CIR, not having clearly signified his final action on the disputed assessment, legally the
period to appeal has not commenced to run.
Surigao vs CTA 57 SCRA 523

Facts:

Petitioner Surigao Electric Co., grantee of a legislative electric franchise, contested a warrant of distraint
and levy to enforce the collection from "Mainit Electric" of a deficiency franchise tax plus surcharge.
Thereafter the Commissioner, by letter dated April 2, 1961, advised the petitioner to take up the matter
with the General Auditing Office, enclosing a copy of the 4th Indorsement of the Auditor General dated
November 23, 1960. This indorsement indicated that the petitioner's liability for deficiency franchise tax
for the period from September 1947 to June 1959 was P21,156.06, excluding surcharge. Subsequently, in
a letter to the Auditor General dated August 2, 1962, the petitioner asked for reconsideration of the
assessment, admitting liability only for the 2% franchise tax in accordance with its legislative franchise and
not at the higher rate of 5% imposed by Sec. 259 of the NIRC, which latter rate the Auditor General used
as basis in computing the petitioner's deficiency franchise tax. An exchange of correspondence between
the petitioner, on the one hand, and the Commissioner and the Auditor General, on the other, ensued, all
on the matter of the petitioner's liability for deficiency franchise tax. The controversy culminated in a
revised assessment dated April 29, 1963 in the amount of P11,533.53, representing the petitioner's
deficiency franchise-tax and surcharges thereon for the period from April 1, 1956 to June 30, 1959. The
petitioner then requested a recomputation of the revised assessment in a letter to the Commissioner
dated June 6, 1963. The Commissioner, however, in a letter dated June 28, 1963 denied the request for
recomputation.

Petitioner appealed to the CTA which was subsequently dismised on the ground that the appeal was filed
beyond the thirty-day period of appeal provided by Sec. 11 of Republic Act 1125.

Issue:

WON the petitioner's appeal to the CTA was time-barred.

Ruling: YES.

To sustain the petitioner's contention that the Commissioner's letter of June 28, 1963 denying its request
for further amendment of the revised assessment constitutes the ruling appealable to the tax court and
that the thirty-day period should, therefore, be counted from July 16, 1963, the day it received the June
28, 1963 letter, would, in effect, leave solely to the petitioner's will the determination of the
commencement of the statutory thirty-day period, and place the petitioner — and for that matter, any
taxpayer — in a position, to delay at will and on convenience the finality of a tax assessment. This absurd
interpretation espoused by the petitioner would result in grave detriment to the interests of the
Government, considering that taxes constitute its life-blood and their prompt and certain availability is an
imperative need.
Oceanic Wireless v. CIR

Facts: On March 17, 1988, petitioner received from the Bureau of Internal Revenue (BIR) deficiency tax
assessments for the taxable year 1984 in the total amount of P8,644,998.71. Petitioner filed its protest
against the tax assessments and requested a reconsideration or cancellation of the same in a letter to the
BIR Commissioner.

Acting in behalf of the BIR Commissioner, then Chief of the BIR Accounts Receivable and Billing Division,
Mr. Severino B. Buot, reiterated the tax assessments while denying petitioner’s request for
reinvestigation. Said letter likewise requested petitioner to pay within 10 days from receipt thereof,
otherwise the case shall be referred to the Collection Enforcement Division of the BIR National Office for
the issuance of a warrant of distraint and levy without further notice.

Upon petitioner’s failure to pay the subject tax assessments within the prescribed period, the Assistant
Commissioner for Collection, acting for the Commissioner of Internal Revenue, issued the corresponding
warrants of distraint and/or levy and garnishment.

Petitioner filed a Petition for Review with the Court of Tax Appeals (CTA) to contest the issuance of the
warrants to enforce the collection of the tax assessments. The CTA dismissed the petition for lack of
jurisdiction.

Petitioner filed a Motion for Reconsideration arguing that the demand letter cannot be considered as the
final decision of the Commissioner of Internal Revenue on its protest because the same was signed by a
mere subordinate and not by the Commissioner himself.

With the denial of its motion for reconsideration, petitioner consequently filed a Petition for Review with
the Court of Appeals contending that there was no final decision to speak of because the Commissioner
had yet to make a personal determination as regards the merits of petitioner’s case.

The Court of Appeals denied the petition.

Issue: Whether the demand letter for tax deficiency issued and signed by a subordinate officer who was
acting in behalf of the CIR is deemed final and executor and subject to an appeal to the CTA.

Held: YES.

A demand letter for payment of delinquent taxes may be considered a decision on a disputed or protested
assessment. The determination on whether or not a demand letter is final is conditioned upon the
language used or the tenor of the letter being sent to the taxpayer. In this case, the letter of demand,
unquestionably constitutes the final action taken by the Bureau of Internal Revenue on petitioner’s
request for reconsideration when it reiterated the tax deficiency assessments due from petitioner, and
requested its payment. Failure to do so would result in the “issuance of a warrant of distraint and levy to
enforce its collection without further notice.” In addition, the letter contained a notation indicating that
petitioner’s request for reconsideration had been denied for lack of supporting documents. The demand
letter received by petitioner verily signified a character of finality. Therefore, it was tantamount to a
rejection of the request for reconsideration.

This now brings us to the crux of the matter as to whether said demand letter indeed attained finality
despite the fact that it was issued and signed by the Chief of the Accounts Receivable and Billing Division
instead of the BIR Commissioner.

The general rule is that the Commissioner of Internal Revenue may delegate any power vested upon him
by law to Division Chiefs or to officials of higher rank. He cannot, however, delegate the four powers
granted to him under the National Internal Revenue Code (NIRC) enumerated in Section .

As amended by Republic Act No. 8424, Section 7 of the Code authorizes the BIR Commissioner to delegate
the powers vested in him under the pertinent provisions of the Code to any subordinate official with the
rank equivalent to a division chief or higher, except the following:

(a) The power to recommend the promulgation of rules and regulations by the Secretary of Finance;

(b) The power to issue rulings of first impression or to reverse, revoke or modify any existing ruling of the
Bureau;

(c) The power to compromise or abate under Section 204(A) and (B) of this Code, any tax deficiency:
Provided, however, that assessments issued by the Regional Offices involving basic deficiency taxes of five
hundred thousand pesos (P500,000) or less, and minor criminal violations as may be determined by rules
and regulations to be promulgated by the Secretary of Finance, upon the recommendation of the
Commissioner, discovered by regional and district officials, may be compromised by a regional evaluation
board which shall be composed of the Regional Director as Chairman, the Assistant Regional Director,
heads of the Legal, Assessment and Collection Divisions and the Revenue District Officer having
jurisdiction over the taxpayer, as members; and

(d) The power to assign or reassign internal revenue officers to establishments where articles subject to
excise tax are produced or kept.

It is clear from the above provision that the act of issuance of the demand letter by the Chief of the
Accounts Receivable and Billing Division does not fall under any of the exceptions that have been
mentioned as non-delegable.

Thus, the authority to make tax assessments may be delegated to subordinate officers. Said assessment
has the same force and effect.
Commissioner of Internal Revenue vs TMX Sales & CTA

FACTS: TMX Sales Inc. filed its quarterly income tax for the 1st quarter of 1981. It declared P571,174.31
and paying an income tax of P247,019 on May 13, 1981. However, during the subsequent quarters, TMX
suffered losses. On April 15, 1982, when TMX filed its Annual Income Tax Return for the year ended in
December 31, 1981, it declared a net loss of P6,156,525. On July 9, 1982, TMX filed with the Appellate
Division of BIR for refund in the amount of P247,010 representing overpaid income tax. His claim was not
acted upon by the Commissioner of Internal Revenue. On May 14, 1984, TMX Sales filed a petition for
review before the Court of Tax Appeals against CIR, praying that the CIR be ordered to refund to TMX the
amount of P247,010. The CIR averred that TMX is already barred for claiming the refund since more than
2 years has elapsed between the payment (May 15, 1981) and the filing of the claim in court (March 14,
1984). The Court of Tax Appeals rendered a decision granting the petition of TMX Sales and ordered CIR
to refund the amount mentioned. Hence, this appeal of CIR.

ISSUE: Whether or not TMX Sales Inc. is entitled to a refund considering that two years gas already elapsed
since the payment of the tax

RULING: Yes. Petition of CIR is denied.

Sec. 292, par. 2 of the National Internal Revenue Code stated that “in any case, no such suit or proceeding
shall be begun after the expiration of two years from the date of the payment of the tax or penalty
regardless of any supervening cause that may arise after payment.” This should be interpreted in relation
to the other provisions of the Tax Code. The most reasonable and logical application of the law would be
to compute the 2-year prescriptive period at the time of the filing of the Final Adjustment Return or the
Annual Income Tax Return, where it can finally be ascertained if the tax payer has still to pay additional
income tax or if he is entitled to a refund of overpaid income tax. Since TMX filed the suit on March 14,
1984, it is within the 2-year prescriptive period starting from April 15, 1982 when they filed their Annual
Income Tax Return.
CIR vs Philam Life

The two-year period, in the case of the quarterly income tax payment system for corporations, should be
deemed to start only from the time the final adjustment tax is due and payable. In Gibbs vs. Commissioner,
the Court said that if the tax is withheld at source, a concept similar to, albeit not on all fours with, the
corporate quarterly tax payment scheme, the two year period starts when the tax falls due at the end of
the taxable year. In fine, corporate income tax payments for the first three quarters of the taxable year
should, for purposes of the two-year prescriptive period, be deemed to have been paid on the 15th day
of April or of the fourth month following the close of the fiscal year covering the entire taxable income of
the preceding calendar or fiscal year.
CIR vs WYETH

Private respondent Wyeth Suaco Laboratories, Inc. (Wyeth Suaco for brevity) is a domestic corporation
engaged in the manufacture and sale of assorted pharmaceutical and nutritional products. By virtue of
Letter of Authority No. 52415 dated June 17, 1974 issued by then Commissioner of Internal Revenue
Misael P. Vera, Revenue Examiner Dante Kabigting conducted an investigation and examination of the
books of accounts of Wyeth Suaco. The report concluded that Wyeth allegedly failed to remit withholding
tax. Consequently, the Bureau of Internal Revenue assessed Wyeth Suaco on the aforesaid tax liabilities
in two (2) notices dated December 16, 1974 and December 17, 1974. These assessment notices were both
received by Wyeth Suaco on December 19, 1974. 4

Thereafter, Wyeth protested the assessments and requesting their cancellation or withdrawal on the
ground that said assessments lacked factual or legal basis. Wyeth Suaco argued that it was not liable to
pay withholding tax at source on the accrued royalties and dividends because they have yet to be remitted
or paid abroad. It claimed that it was not able to remit the balance of fifty percent (50%) of the accrued
royalties to its foreign licensors because of Central Bank Circular No. 289 allowing remittance of royalties
up to fifty percent (50%) only. Thus, Wyeth Suaco's contention was that a withholding tax at source on
royalties and dividends becomes due and payable only upon their actual payment or remittance.

the Commissioner of Internal Revenue asked Wyeth Suaco to avail itself of the compromise settlement
under LOI 308. In its answer, Wyeth Suaco manifested its conformity to a 10% compromise provided it be
applied only to the basic sales tax, excluding surcharge and interest. As to the deficiency withholding tax
at source, Wyeth took exception on the ground that it involves purely a legal question and some of the
amounts included in the assessment have already bee paid. petitioner, thru then acting Commissioner of
Internal Revenue rendered a decision reducing the assessment of the withholding tax at source for 1973
to P1,973,112.86.

Thereafter, Wyeth Suaco filed a petition for review in Court of Tax Appeals on January 18, 1980, praying
that petitioner be enjoined from enforcing the assessments by reason of prescription and that the
assessments be declared null for lack of legal and factual basis.

The Court of Tax Appeals rendered a decision enjoining the CIR from collecting the deficiency taxes, the
dispositive portion as statin that while the assessments for the deficiency taxes were made within the
five-year period of limitation, the right of petitioner to collect the same has already prescribed, in
accordance with Section 319 (c) of the Tax Code of 1977. The said law provides that an assessment of any
internal revenue tax within the five-year period of limitation may be collected by distraint or levy or by a
proceeding in court, but only if begun within five (5) years after the assessment of the tax.

ISSUE:

Is the Petitioner enjoined from collecting the deficiency tax by virtue of the five year prescription stated
by law?

Is the regulation imposed by the Bureau of Intemal Revenue of requiring a withholding agent or taxpayer
to remit the taxes deducted and withheld at source on incomes which have not yet been paid legal?

Answer to first issue

Settled is the rule that the prescriptive period provided by law to make a collection by distraint or levy or
by a proceeding in court is interrupted once a taxpayer requests for reinvestigation or reconsideration of
the assessment. Next question to consider is, did wyeth suaco ask for a reconsideration or reinvestigation
of the assessment? Although the protest letters prepared by SGV & Co. in behalf of private respondent
did not categorically state or use the words "reinvestigation" and "reconsideration," the same are to be
treated as letters of reinvestigation and reconsideration. These letters of Wyeth Suaco interrupted the
running of the five-year prescriptive period to collect the deficiency taxes. Upon receiving these letters
CIR reinvestigated the assessments made. This period started to run again when the Bureau of Internal
Revenue served the final assessment to Wyeth Suaco on January 2, 1980 then, only about four (4) months
of the five-year prescriptive period was used.

Answer to second question.

the Tax Code, particularly Section 54 (a) [now Section 51 (a)] provides that "the Commissioner of Internal
Revenue may, with the approval of the Secretary of Finance, require the withholding agents to pay or
deposit the taxes deducted and withheld at more frequent intervals when necessary to protect the
interest of the government…"

the records show that Wyeth Suaco adopted the accrual method of accounting wherein the effect of
transactions and other events on assets and liabilities are recognized and reported in the time periods to
which they relate rather than only when cash is received or paid. The "Report of Investigation" submitted
by the tax examiner indicated that accrual was the basis of the taxpayer's return. 18 Thus, private
respondent recorded accrued royalties and dividends payable as well as the withholding tax at source
payable on these incomes. Having deducted and withheld the tax at source and having recorded the
withholding tax at source payable in its books of accounts, private respondent was obligated to remit the
same to the Bureau of Internal Revenue.
ABS CBN vs CTA

FACTS:

The ABS-CBN Broadcasting Corporation (herein shall be called the “Company”) was engaged in the
business of telecasting local as well as foreign films acquired from foreign corporations not engaged in
trade or business with the Philippines. Under Section 24 (b) of the National Revenue Code, a withholding
tax of 30% (RA 2343). It was implemented through Circular No. V-334. Pursuant to the foregoing, ABS-
CBN dutifully withheld and turned over to the BIR the amount of 30% of one-half of the film rentals paid
by it to foreign corporations not engaged in trade or business within the Philippines. The last year that
ABS-CBN withheld taxes pursuant to the foregoing Circular was in 1968.

RA 5431 amended Section 24 (b) of the Tax Code increasing the tax rate from 30 % to 35 % and revising
the tax basis from “such amount” referring to rents, etc. to “gross income.” The following was
implemented by Circular No. 4-71.

Petitioner requested for a reconsideration and withdrawal of the assessment.

ISSUE/S:

Whether or not respondent can apply General Circular No. 4-71 retroactively and issue a deficiency
assessment against petitioner.

HELD/DECISION:

Any rulings or circulars promulgated by the CIR have no retroactive application when it would be
prejudicial to taxpayers. The retroactive application of Memorandum Circular No. 4-71 prejudices ABS-
CBN since:

1. The assessment and demand on petitioner to pay deficiency withholding income tax was also made
three years after 1968 for a period of time commencing in 1965.

2. ABS-CBN was no longer in a position to withhold taxes due from foreign corporations because it had
already remitted all film rentals and no longer had any control over them when the new Circular was
issued.
CIR v. CTA & Fortune Tobacco

FACTS:

‘Champion,’ ‘Hope,’ and ‘More’ were classified as foreign brands since they were listed in the World
Tobacco Directory as belonging to foreign companies.

However, Fortune Tobacco changed the names of ‘Hope’ to ‘Hope Luxury’ and ‘More’ to ‘Premium More,’
thereby removing the said brands from the foreign brand category and registered as a local brand.” Ad
Valorem taxes were imposed on these brands.

RMC 37-93, Reclassification of Cigarettes Subject to Excise Tax, was issued by the BIR which aims to collect
deficiencies on ad valorem taxes against Fortune Tobacco following their reclassification as foreign
branded cigarettes.

“HOPE,” “MORE” and “CHAMPION” being manufactured by Fortune Tobacco Corporation were
considered locally manufactured cigarettes bearing a foreign brand subject to the 55% ad valorem tax on
cigarettes under RA 7654.

Fortune Tobacco filed a petition for review with the CTA. RMC 37-93 is found to be defective, invalid and
unenforceable.

ISSUE:

Is RMC 37-93 a mere interpretative ruling, therefore not requiring, for its effectivity, hearing and filing
with the UP Law Center?

RULING:

A reading of RMC 37-93, particularly considering the circumstances under which it has been issued,
convinces us that the circular cannot be viewed simply as a corrective measure (revoking in the process
the previous holdings of past Commissioners) or merely as construing Section 142(c)(1) of the NIRC, as
amended, but has, in fact and most importantly, been made in order to place “Hope Luxury,” “Premium
More” and “Champion” within the classification of locally manufactured cigarettes bearing foreign brands
and to thereby have them covered by RA 7654.

Specifically, the new law would have its amendatory provisions applied to locally manufactured cigarettes
which at the time of its effectivity were not so classified as bearing foreign brands. Prior to the issuance
of the questioned circular, “Hope Luxury,” “Premium More,” and “Champion” cigarettes were in the
category of locally manufactured cigarettes not bearing foreign brand subject to 45% ad valorem tax.

Hence, without RMC 37-93, the enactment of RA 7654, would have had no new tax rate consequence on
private respondent’s products. Evidently, in order to place “Hope Luxury,” “Premium More,” and
“Champion” cigarettes within the scope of the amendatory law and subject them to an increased tax rate,
the now disputed RMC 37-93 had to be issued. In so doing, the BIR not simply intrepreted the law; verily,
it legislated under its quasi-legislative authority.The due observance of the requirements of notice, of
hearing, and of publication should not have been then ignored.
Indeed, the BIR itself, in its RMC 10-86, has observed and provided:

In order that there shall be a just enforcement of rules and regulations, in conformity with the basic
element of due process, the following procedures are hereby prescribed for the drafting, issuance and
implementation of the said Revenue Tax Issuances:

(1) This Circular shall apply only to (a) Revenue Regulations; (b) Revenue Audit Memorandum Orders;
and (c) Revenue Memorandum Circulars and Revenue Memorandum Orders bearing on internal revenue
tax rules and regulations.

(2) Except when the law otherwise expressly provides, the aforesaid internal revenue tax issuances
shall not begin to be operative until after due notice thereof may be fairly presumed.

Due notice of the said issuances may be fairly presumed only after the following procedures have been
taken;

(5) Strict compliance with the foregoing procedures is enjoined.

Nothing on record could tell us that it was either impossible or impracticable for the BIR to observe and
comply with the above requirements before giving effect to its questioned circular.

All taken, the Court is convinced that the hastily promulgated RMC 37-93 has fallen short of a valid and
effective administrative issuance.
CIR v. Pascor Realty and Development

FACTS:

The BIR examined the books of account of Pascor Realty and Devt Corp. (PRDC) for the years 1986, 1987
and 1988, from which a tax liability of P10.5M was found. Subsequently, the CIR filed a criminal complaint
against PRDC with the DOJ for tax evasion. Attached to the criminal complaint was a Joint Affidavit
executed by the tax examiners. PRDC filed an Urgent Request for Reconsideration/Reinvestigation with
the CIR, disputing the tax assessment and tax liability, but was denied upon the ground that no formal
assessment has yet been issued by the Commissioner.

PRDC elevated the decision to the CTA. PRDC averred that the Joint Affidavit attached to the criminal
complaint is tantamount to a formal assessment notice and hence can be subjected to protest; that there
is a simultaneous assessment and filing of criminal case; that the same is contrary to due process because
it is its theory that an assessment should come first before a criminal case of tax evasion should be filed.
The CIR filed a Motion to Dismiss the petition on the ground that the CTA has no jurisdiction over the
subject matter of the petition, as there was no formal assessment issued against the petitioners.

The CTA denied the said motion to dismiss. It ruled that the Joint Affidavit constitutes an assessment; that
an assessment is defined as simply the statement of the details and the amount of tax due from a
taxpayer; thus the Joint Affidavit which contains a computation of the tax liability of PRDC is in effect an
assessment which can be the subject of a protest. CA affirmed the CTA.

ISSUES:

1. Whether or not the criminal complaint for tax evasion can be construed as an assessment. - NO

2. Whether or not an assessment is necessary before criminal charges for tax evasion may be instituted. -
NO

HELD:

1. An assessment not only contains a computation of tax liabilities, but also a demand for payment within
a prescribed period. It signals the time when penalties and interests begin to accrue against the taxpayer.

In the case at bar, the BIR examiners’ Joint Affidavit which was attached to the criminal complaint filed
with the DOJ against PRDC, did not constitute an assessment. The Joint Affidavit served the purpose of
supporting and substantiating the criminal complaint for tax evasion, and was not meant to be a notice of
the tax due and a demand to the taxpayer (PRDC) for payment thereof.

2. (Extra issue) Section 222 of the NIRC specifically states that in cases where a false or fraudulent return
is submitted or in cases of failure to file a return such as this case, proceedings in court may be commenced
without an assessment. Furthermore, Section 205 of the same Code clearly mandates that the civil and
criminal aspects of the case may be pursued simultaneously.
Lascona Land vs CIR

Facts:

On March 27, 1998, the Commissioner of Internal Revenue (CIR) issued Assessment Notice against
Lascona Land Co., Inc. (Lascona) informing the latter of its alleged deficiency income tax for the year 1993.

Consequently, on April 20, 1998, Lascona filed a letter protest to the BIR, questioning the said assessment.

On March 3, 1999, the Bureau of Internal Revenue denied the protest on the ground that it failed to
elevated to the Court of Tax Appeals within thirty (30) days from the lapse of the One Hundred Eighty
(180)-day period pursuant to Section 228 of the NIRC.

On April 12, 1999, Lascona appealed the decision before the Court of Tax Appeals. Lascona alleged that
the Regional Director erred in ruling that the failure to appeal to the CTA within thirty (30) days from the
lapse of the 180-day period rendered the assessment final and executory.

The CIR, however, maintained that Lascona’s failure to timely file an appeal with the CTA after the lapse
of the 180-day reglementary period provided under Section 228 of the National Internal Revenue Code
(NIRC) resulted to the finality of the assessment.

Issue:

Whether the subject assessment has become final, executory and demandable due to the failure of
petitioner to file an appeal before the CTA within thirty (30) days from the lapse of the One Hundred
Eighty (180)-day period pursuant to Section 228 of the NIRC.

Ruling:

BIR is not correct.

Section 228 of the NIRC is instructional as to the remedies of a taxpayer in case of the inaction of the
Commissioner on the protested assessment, to wit:

“SEC. 228. Protesting of Assessment. − x x x If the protest is denied in whole or in part, or is not acted upon
within one hundred eighty (180) days from submission of documents, the taxpayer adversely affected by
the decision or inaction may appeal to the Court of Tax Appeals within (30) days from receipt of the said
decision, or from the lapse of the one hundred eighty (180)-day period; otherwise the decision shall
become final, executory and demandable. (Emphasis supplied).

In arguing that the assessment became final and executory by the sole reason that petitioner failed to
appeal the inaction of the Commissioner within 30 days after the 180-day reglementary period,
respondent, in effect, limited the remedy of Lascona, as a taxpayer, under Section 228 of the NIRC to just
one, that is – to appeal the inaction of the Commissioner on its protested assessment after the lapse of
the 180-day period.
This is incorrect.

The taxpayer has two options, either:

(1) file a petition for review with the CTA within 30 days after the expiration of the 180-day period; or

(2) await the final decision of the Commissioner on the disputed assessment and appeal such final
decision to the CTA within 30 days after the receipt of a copy of such decision, these options are mutually
exclusive and resort to one bars the application of the other.

Accordingly, considering that Lascona opted to await the final decision of the Commissioner on the
protested assessment, it then has the right to appeal such final decision to the Court by filing a petition
for review within thirty days after receipt of a copy of such decision or ruling, even after the expiration of
the 180-day period fixed by law for the Commissioner of Internal Revenue to act on the disputed
assessments. Thus, Lascona, when it filed an appeal on April 12, 1999 before the CTA, after its receipt of
the Letter dated March 3, 1999 on March 12, 1999, the appeal was timely made as it was filed within 30
days after receipt of the copy of the decision.
San Agustin vs CIR

Facts:

FACTS: (as narrated by CA)

 June 27, 1990 - Atty. Jose San Agustin of 2904 Kakarong St., Olympia, Makati died leaving his wife
Dra. Felisa L. San Agustin as sole heir.
 He left a holographic will executed on April 21, 1980 giving all his estate to his widow (Felisa L.
San Agustin), and naming retired Justice Jose Y. Feria as Executor thereof.
 Sept 3 - an estate tax return reporting estate tax due of P1,676,432.00 was filed on behalf of the
estate, with a request for an extension of 2 years for the payment of the tax because the payment
had to come from the estate since the widow did not have enough money.
 Letter/answer - BIR Deputy Commissioner Victor A. Deoferio, Jr., granted the heirs an extension
of only 6 months, subject to the imposition of penalties and interests (Sections 248 and 249 NIRC).
 Probate proceedings - RTC allowed the will and appointed Jose Feria as Executor of the estate.
 Dec 5 - executor submitted an inventory of the estate with a motion for authority to withdraw
funds for the payment of the estate tax. this was granted.
 Mar 8, 1991 – (within the 6 mo. extension) the executor paid the estate tax of P1,676,432 as
reported in the Tax Return filed with the BIR.
 Sept 23 -the widow of the deceased, Felisa L. San Agustin, received a Pre-Assessment Notice from
the BIR (dated August 29, 1991), showing a deficiency estate tax of P538,509.50, which, including
surcharge, interest and penalties, amounted to P976,540.00
 Oct 1 (within the ten-day period given in the pre-assessment notice) - executor filed a letter with
the Commissioner expressing readiness to pay the basic deficiency estate tax of P538,509.50 as
soon as the RTC approves withdrawal thereof,
o but, requesting that the surcharge, interest, and other penalties, amounting to
P438,040.38 be waived, considering that the assessed deficiency arose only on account
of the difference in zonal valuation used by the Estate and the BIR, and that the estate tax
due per return of P1,676,432.00 was already paid in due time within the extension period.
 Oct 4 - Commissioner issued an Assessment Notice reiterating the demand in the pre- assessment
notice and requesting payment on or before 30 days upon receipt thereof.
 Oct 31 letter - executor requested the Commissioner a reconsideration of the assessment of
P976,549.00 and waiver of the surcharge, interest, etc.
 Dec 18 - Commissioner accepted payment of the basic deficiency tax in the amount of
P538,509.50 through its Receivable Accounts Billing Division.
 Request was only acted upon on Jan 21, 1993 - when the executor received a letter (dated
September 21, 1992), signed by the Commissioner, stating that there is no legal justification for
the waiver of the interests, surcharge and compromise penalty in this case, and requiring full
payment of P438,040.38 representing such charges within 10 days from receipt thereof.
 Jan 25 - Estate paid P438,040.38 under protest.
 Commissioner opposed, alleging that the CTA's jurisdiction was not properly invoked as no claim
for a tax refund of the deficiency tax collected was filed with the BIR before the petition was filed,
violating of Sections 204 and 230 NIRC.
 o Moreover, there is no statutory basis for the refund of the deficiency surcharges, interests
and penalties charged by the Commissioner upon the estate of the decedent.

Issue: Whether or not the filing of a refund is essential before filing a petition for review

Held: NO

We agree with petitioner that Section 7 of Republic Act No. 1125, creating the Court of Tax Appeals, in
providing for appeals from -

`(1) Decisions of the Collector of Internal Revenue in cases involving disputed assessments, refunds of
internal revenue taxes, fees or other charges, penalties imposed in relation thereto, or other matters
arising under the National Internal Revenue Code or other law or part of the law administered by the
Bureau of Internal Revenue -

allows an appeal from a decision of the Collector in cases involving `disputed assessments as distinguished
from cases involving `refunds of internal revenue taxes, fees or other charges, x x x; that the present action
involves a disputed assessment; because from the time petitioner received assessments Nos. 17-EC-
00301-55 and 17-AC-600107-56 disallowing certain deductions claimed by him in his income tax returns
for the years 1955 and 1956, he already protested and refused to pay the same, questioning the
correctness and legality of such assessments; and that the petitioner paid the disputed assessments under
protest before filing his petition for review with the Court a quo, only to forestall the sale of his properties
that had been placed under distraint by the respondent Collector since December 4, 1957. To hold that
the taxpayer has now lost the right to appeal from the ruling on the disputed assessment but must
prosecute his appeal under section 306 of the Tax Code, which requires a taxpayer to file a claim for refund
of the taxes paid as a condition precedent to his right to appeal, would in effect require of him to go
through a useless and needless ceremony that would only delay the disposition of the case, for the
Collector (now Commissioner) would certainly disallow the claim for refund in the same way as he
disallowed the protest against the assessment. The law, should not be interpreted as to result in
absurdities
Philippine Journalist vs CIR

FACTS:

The case arose from the Annual ITR filed by petitioner for the calendar year ended Dec 31, 1994 wc
presented a net income of P30,877,387 and the tax = P10,807,086. After deducting tax credits for the
year, P paid the amount of P10,247,384.

On Aug 10, 1995, Revenue District Office No. 33 of the BIR issued Letter of Authority No. 87120 for
Revenue Officer de Vera, Jr. and Group Supervisor Gapasin to examine P’s books of account and other
accounting records for internal revenue taxes for the period Jan 1, 1994-Dec 31, 1994. From the
examination, P was told that there were deficiency taxes, inclusive of surcharges, interest and
compromise penalty = 127,980,433.20

In a letter, Revenue District Officer Concepcion invited P to send a rep. to an informal conference on Sep
15, 1997 for an opportunity to object and present documentary evidence relative to the proposed
assessment. But P’s Comptroller, Tolentino, executed a "Waiver of the Statute of Limitation Under the
NIRC”. The document "waive[d] the running of the prescriptive period provided by Sec 223 & 224 and
other relevant provisions of the NIRC and consented to the assessment and collection of taxes which may
be found due after the examination at any time after the lapse of the period of limitations fixed by said
Sections, until the completion of the investigation.”

Revenue Officer De Vera submitted his audit report recommending the issuance of an assessment and
finding that P had deficiency taxes = P136,952,408.97. The Assessment Division of the BIR issued Pre-
Assessment Notices which informed P of the results of the investigation. Thus, BIR Revenue Region No. 6,
Assessment Division/Billing Section, issued Assessment/Demand No. 33-1-000757-94 on December 9,
1998 stating the deficiency taxes, inclusive of interest and compromise penalty = 111,291,214.46

A Preliminary Collection Letter was sent by Deputy Commissioner Panganiban to the P to pay the
assessment within 10 days from receipt of the letter. On Nov 10, 1999, a Final Notice Before Seizure was
issued by the same deputy commissioner giving P 10 days from receipt to pay. P received a copy of the
final notice on Nov 24, 1999. By letters dated Nov 26, 1999, P asked to be clarified how the tax liability of
P111,291,214.46 was reached and requested an extension of 30 days from receipt of the clarification
within which to reply.

The BIR received a follow-up letter asserting that its (PJI) records do not show receipt of Tax
Assessment/Demand No. 33-1-000757-94. P also contested that the assessment had no factual and legal
basis. A Warrant of Distraint and/or Levy signed by Deputy Commissioner Panganiban for the BIR was
received by P.

P filed a Petition for Review with CTA. P complains: (a) that no assessment or demand was received from
the BIR; (b) that the warrant of distraint and/or levy was w/o factual and legal bases as its issuance was
premature; (c) that the assessment, having been made beyond the 3yr prescriptive period, is null and
mright to due process; and (e) that the grave prejudice that will be sustained if the warrant is enforced is
enough basis for the issuance of the writ of preliminary injunction.

CTA: As to WON the assessment notices were received by P, CTA rules in the affirmative. To disprove P’s
allegation of non-receipt of notices, R presented a certification issued by the Post Master of the Central
Post Office, Manila to the effect that Registered Letter No. 76134 sent by the BIR on Dec 15, 1998
addressed to Phil. Journalists, Inc. at Journal Bldg., Railroad St., Manila was duly delivered to and received
by a certain Alfonso Sanchez, Jr. (Authorized Representative) on Jan 8, 1999. R also showed proof that in
claiming Registered Letter No. 76134, Mr. Sanchez presented 3 IDs, one of which is his company ID.
However, as to WON the Waiver of the Statute of Limitations is valid and binding on the P is another
question. After carefully examining the questioned Waiver of the Statute of Limitations, this Court
considers the same to be without any binding effect on P for the ff reasons: (1) the waiver is an unlimited
waiver. It does not contain a definite expiration date, (2) the waiver failed to state the date of acceptance
by the Bureau; and (3) P was not furnished a copy of the waiver. It is to be noted that under RMO No. 20-
90, the waiver must be executed in 3 copies, the 2nd copy of which is for the taxpayer. It is likewise
required that the fact of receipt by the taxpayer of his/her file copy be indicated in the orig copy. It bears
stressing that RMO No. 20-90 is directed to all concerned internal revenue officers. The said RMO even
provides that the procedures found therein should be strictly followed, under pain of being
administratively dealt with should non-compliance result to prescription of the right to assess/collect.

Thus, finding the waiver executed by P on Sept 22, 1997 to be suffering from legal infirmities, rendering
the same invalid and ineffective, CTA finds Assessment/Demand No. 33-1-000757-94 to be time-barred.
Consequently, the Warrant of Distraint and/or Levy issued pursuant thereto is considered null and void.

CIR’s MR was denied by CTA so it appealed to CA wc disagreed w the CTA. The petition for review with
CTA was neither timely filed nor the proper remedy. Only decisions of the BIR, denying the request for
reconsideration or reinvestigation may be appealed to the CTA. Mere assessment notices which have
become final after the lapse of 30d reglementary period are not appealable. Thus, the CTA should not
have entertained the petition at all.

The CTA found the waiver executed by Phil. Journalists to be invalid for 3 reasons but the CA said that
these grounds are merely formal in nature. The date of acceptance by the BIR does not categorically
appear in the document but it states at the bottom page that the BIR "accepted and agreed to:"…,
followed by the signature of the BIR’s authorized rep. Although the date of acceptance was not stated,
the document was dated 22 Sep 1997 = reasonably be understood as the same date of acceptance by the
BIR. As to the allegation that P was not furnished a copy of the waiver, this req’t appears ridiculous
because it was its representative who signed the waiver. As regards the need for a definite expiration
date, this is the biggest flaw of the decision. The period of prescription for the assessment of taxes may
be extended provided that the extension be made in writing and that it be made prior to the expiration
of the period of prescription.

ISSUE WON the waiver is valid – NO

RULING: Petition GRANTED.

RATIO:

The 2nd and 5th assigned errors both focus on RMO No. 20-90 on the requisites of a valid waiver of the
statute of limitations. The CA held that the req’ts and procedures laid down in the RMO are only formal
in nature and did not invalidate the waiver that was signed even if the requirements were not strictly
observed.

The NIRC, under Sect 203 and 222, provides for a statute of limitations on the assessment and collection
of internal revenue taxes in order to safeguard the interest of the taxpayer against unreasonable
investigation. Unreasonable investigation contemplates cases where the period for assessment extends
indefinitely because this deprives the taxpayer of the assurance that it will no longer be subjected to
further investigation for taxes after the expiration of a reasonable period of time. RMO No. 20-90
implements these provisions of the NIRC relating to the period of prescription for the assessment and
collection of taxes. A cursory reading of the Order supports petitioner’s argument that the RMO must be
strictly followed (use of the word “must”, among others)

A waiver of the statute of limitations under the NIRC, to a certain extent, is a derogation of the taxpayers’
right to security against prolonged and unscrupulous investigations and must therefore be carefully and
strictly construed. The waiver of the statute of limitations is not a waiver of the right to invoke the defense
of prescription as erroneously held by the CA. It is an agreement between the taxpayer and the BIR that
the period to issue an assessment and collect the taxes due is extended to a date certain. The waiver does
not mean that the taxpayer relinquishes the right to invoke prescription unequivocally particularly where
the language of the document is equivocal. For the purpose of safeguarding taxpayers from any
unreasonable examination, investigation/assessment, our tax law provides a statute of limitations in the
collection of taxes. Thus, the law on prescription, being a remedial measure, should be liberally construed
in order to afford such protection. As a corollary, the exceptions to the law on prescription should perforce
be strictly construed. RMO No. 20-90 explains the rationale of a waiver: “The period agreed upon shall
constitute the time within which to effect the assessment/collection of the tax in addition to the ordinary
prescriptive period.”

As found by the CTA, the Waiver of Statute of Limitations, signed by P’s comptroller is not valid and binding
because it does not conform with the provisions of RMO No. 20-90. P’s waiver became unlimited in time,
violating Sec 222(b) of the NIRC. The waiver is also defective from the gov’t side because it was signed
only by a revenue district officer, not the Commissioner, as mandated by the NIRC and RMO No. 20-90.
The waiver is not a unilateral act by the taxpayer or the BIR, but is a bilateral agreement bet. 2 parties to
extend the period to a date certain. The conformity of the BIR must be made by either the
Commissioner/the Revenue District Officer. This case involves taxes amounting to more than 1M and
executed almost 7mos before the expiration of the 3yr prescription period. For this, RMO No. 20-90
requires the Commissioner of Internal Revenue to sign for the BIR.

The other defect noted in this case is the date of acceptance which makes it difficult to fix with certainty
if the waiver was actually agreed before the expiration of the 3yr prescriptive period. The CA held that the
date of the execution of the waiver on Sep 22, 1997 could reasonably be understood as the same date of
acceptance by the BIR. P points out however that RDO Sarmiento could not have accepted the waiver yet
because she was not the officer of RDO No. 33 on such date. Ms. Sarmiento’s transfer and assignment to
RDO No. 33 was only signed by the BIR Commissioner on Jan 16, 1998 as shown by the Revenue Travel
Assignment Order No. 14-98. The CTA noted in its decision that it is unlikely as well that Ms. Sarmiento
made the acceptance on Jan 16, 1998 because "Revenue Officials normally have to conduct first an
inventory of their pending papers and property responsibilities."29
Finally, the records show that P was not furnished a copy of the waiver. Under RMO No. 20-90, the waiver
must be executed in 3 copies with the 2ND copy for the taxpayer. The flaw in CA’s reasoning stems from
its assumption that the waiver is a unilateral act of the taxpayer when it is in fact and in law an agreement
between the taxpayer and the BIR. The requirement to furnish the taxpayer with a copy of the waiver is
not only to give notice of the existence of the document but of the acceptance by the BIR and the
perfection of the agreement.

The waiver document is incomplete and defective and thus the 3yr prescriptive period was not tolled or
extended and continued to run until Apr 17, 1998. Consequently, the Assessment/Demand No. 33-1-
000757-94 issued on Dec 9, 1998 was invalid because it was issued beyond the 3yr period. In the same
manner, Warrant of Distraint and/or Levy No. 33-06-046 which petitioner received on March 28, 2000 is
also null and void for having been issued pursuant to an invalid assessment.
COMMISSIONER OF INTERNAL REVENUE, vs PHILIPPINE GLOBAL COMMUNICATION, INC.,

FACTS:

Respondent, a corporation engaged in telecommunications, filed its Annual Income Tax Return for taxable
year 1990 on 15 April 1991.

On 13 April 1992, the Commissioner of Internal Revenue (CIR) issued Letter of Authority No. 0002307,
authorizing the appropriate Bureau of Internal Revenue (BIR) officials to examine the books of account
and other accounting records of respondent, in connection with the investigation of respondent’s 1990
income tax liability.

On 22 April 1992, the BIR sent a letter to respondent requesting the latter to present for examination
certain records and documents, but respondent failed to present any document.

On 21 April 1994, respondent received a Preliminary Assessment Notice dated 13 April 1994 for deficiency
income tax in the amount of P118,271,672.00.

On the following day, 22 April 1994, respondent received a Formal Assessment Notice with Assessment
Notice No. 000688-80-7333, dated 14 April 1994, for deficiency income tax in the total amount of
P118,271,672.00.

On 6 May 1994, respondent, through its counsel filed a formal protest letter against Assessment Notice
No. 000688-80-7333. Respondent filed another protest letter on 23 May 1994, through another counsel.

In both letters, respondent requested for the cancellation of the tax assessment, which they alleged was
invalid for lack of factual and legal basis.

On 16 October 2002, more than eight years after the assessment was presumably issued, the Ponce Enrile
Cayetano Reyes and Manalastas Law Offices received from the CIR a Final Decision dated 8 October 2002
denying the respondent’s protest against Assessment Notice No. 000688-80-7333, and affirming the said
assessment in toto.

Respondents filed a petition for review with the CTA. CTA ruled on the primary issue of prescription. It
decided that the protest letters filed by the respondent cannot constitute a request for reinvestigation,
hence, they cannot toll the running of the prescriptive period to collect the assessed deficiency income
tax.7 Thus, since more than three years had lapsed from the time Assessment Notice No. 000688-80-7333
was issued in 1994, the CIR’s right to collect the same has prescribed.

ISSUE: Whether or not the CIR’s right to collect the tax under said Assessment notice has prescribed.

HELD: YES

Sec. 269 provides for the exceptions as to the period of limitation where, Any internal revenue tax which
has been assessed within the period of limitation above-prescribed may be collected by distraint or levy
or by a proceeding in court within three years following the assessment of the tax.

The law prescribed a period of three years from the date the return was actually filed or from the last date
prescribed by law for the filing of such return, whichever came later, within which the BIR may assess a
national internal revenue tax.13 However, the law increased the prescriptive period to assess or to begin
a court proceeding for the collection without an assessment to ten years when a false or fraudulent return
was filed with the intent of evading the tax or when no return was filed at all.14 In such cases, the ten-
year period began to run only from the date of discovery by the BIR of the falsity, fraud or omission.

If the BIR issued this assessment within the three-year period or the ten-year period, whichever was
applicable, the law provided another three years after the assessment for the collection of the tax due
thereon through the administrative process of distraint and/or levy or through judicial proceedings.15
The three-year period for collection of the assessed tax began to run on the date the assessment notice
had been released, mailed or sent by the BIR.

The assessment, in this case, was presumably issued on 14 April 1994 since the respondent did not dispute
the CIR’s claim. Therefore, the BIR had until 13 April 1997. However, as there was no Warrant of Distraint
and/or Levy served on the respondents nor any judicial proceedings initiated by the BIR, the earliest
attempt of the BIR to collect the tax due based on this assessment was when it filed its Answer in CTA
Case No. 6568 on 9 January 2003, which was several years beyond the three-year prescriptive period.
Thus, the CIR is now prescribed from collecting the assessed tax.

In a number of cases, this Court has also clarified that the statute of limitations on the collection of taxes
should benefit both the Government and the taxpayers.

Thus, in Commissioner of Internal Revenue v. B.F. Goodrich,21 this Court affirmed that the law on
prescription should be liberally construed in order to protect taxpayers and that, as a corollary, the
exceptions to the law on prescription should be strictly construed.

The Tax Code of 1977, as amended, provides instances when the running of the statute of limitations on
the assessment and collection of national internal revenue taxes could be suspended, even in the absence
of a waiver, when the taxpayer requests for a reinvestigation which is granted by the Commissioner; when
the taxpayer cannot be located in the address given by him in the return filed upon which a tax is being
assessed or collected x x x. (Emphasis supplied.)

Among the exceptions provided by the aforecited section, and invoked by the CIR as a ground for this
petition, is the instance when the taxpayer requests for a reinvestigation which is granted by the
Commissioner. However, this exception does not apply to this case since the respondent never requested
for a reinvestigation. More importantly, the CIR could not have conducted a reinvestigation where, as
admitted by the CIR in its Petition, the respondent refused to submit any new evidence.

Revenue Regulations No. 12-85, the Procedure Governing Administrative Protests of Assessment of the
Bureau of Internal Revenue, issued on 27 November 1985, defines the two types of protest, the request
for reconsideration and the request for reinvestigation, and distinguishes one from the other in this
manner:

Section 6. Protest. - The taxpayer may protest administratively an assessment by filing a written request
for reconsideration or reinvestigation specifying the following particulars:

xxxx

For the purpose of protest herein—

(a) Request for reconsideration-- refers to a plea for a re-evaluation of an assessment on the basis of
existing records without need of additional evidence. It may involve both a question of fact or of law or
both.

(b) Request for reinvestigation—refers to a plea for re-evaluation of an assessment on the basis of newly-
discovered evidence or additional evidence that a taxpayer intends to present in the investigation. It may
also involve a question of fact or law or both.

The main difference between these two types of protests lies in the records or evidence to be examined
by internal revenue officers, whether these are existing records or newly discovered or additional
evidence. A re-evaluation of existing records which results from a request for reconsideration does not
toll the running of the prescription period for the collection of an assessed tax. Section 271 distinctly limits
the suspension of the running of the statute of limitations to instances when reinvestigation is requested
by a taxpayer and is granted by the CIR.

The Court provided a clear-cut rationale in the case of Bank of the Philippine Islands v. Commissioner of
Internal Revenue22 explaining why a request for reinvestigation, and not a request for reconsideration,
interrupts the running of the statute of limitations on the collection of the assessed tax:

Undoubtedly, a reinvestigation, which entails the reception and evaluation of additional evidence, will
take more time than a reconsideration of a tax assessment, which will be limited to the evidence already
at hand; this justifies why the former can suspend the running of the statute of limitations on collection
of the assessed tax, while the latter cannot.

In the present case, the separate letters of protest dated 6 May 1994 and 23 May 1994 are requests for
reconsideration. The CIR’s allegation that there was a request for reinvestigation is inconceivable since
respondent consistently and categorically refused to submit new evidence and cooperate in any
reinvestigation proceedings.

The distinction between a request for reconsideration and a request for reinvestigation is significant. It
bears repetition that a request for reconsideration, unlike a request for reinvestigation, cannot suspend
the statute of limitations on the collection of an assessed tax. If both types of protest can effectively
interrupt the running of the statute of limitations, an erroneous assessment may never prescribe. If the
taxpayer fails to file a protest, then the erroneous assessment would become final and unappealable.29
On the other hand, if the taxpayer does file the protest on a patently erroneous assessment, the statute
of limitations would automatically be suspended and the tax thereon may be collected long after it was
assessed. Meanwhile the interest on the deficiencies and the surcharges continue to accumulate. And for
an unrestricted number of years, the taxpayers remain uncertain and are burdened with the costs of
preserving their books and records. This is the predicament that the law on the statute of limitations seeks
to prevent.

In the present case the respondent did nothing to prevent the BIR from collecting the tax. It did not
present to the BIR any new evidence for its re-evaluation. At the earliest opportunity, respondent insisted
that the assessment was invalid and made clear to the BIR its refusal to produce documents that the BIR
requested. On the other hand, the BIR also communicated to the respondent its unwavering stance that
its assessment is correct. Given that both parties were at a deadlock, the next logical step would have
been for the BIR to issue a Decision denying the respondent’s protest and to initiate proceedings for the
collection of the assessed tax and, thus, allow the respondent, should it so choose, to contest the
assessment before the CTA. Postponing the collection for eight long years could not possibly make the
taxpayer feel that the demand was not unreasonable or that no harassment or injustice is meant by the
Government.

Thus, the three-year statute of limitations on the collection of an assessed tax provided under Section
269(c) of the Tax Code of 1977, a law enacted to protect the interests of the taxpayer, must be given
effect. In providing for exceptions to such rule in Section 271, the law strictly limits the suspension of the
running of the prescription period to, among other instances, protests wherein the taxpayer requests for
a reinvestigation. In this case, where the taxpayer merely filed two protest letters requesting for a
reconsideration, and where the BIR could not have conducted a reinvestigation because no new or
additional evidence was submitted, the running of statute of limitations cannot be interrupted. The tax
which is the subject of the Decision issued by the CIR on 8 October 2002 affirming the Formal Assessment
issued on 14 April 1994 can no longer be the subject of any proceeding for its collection. Consequently,
the right of the government to collect the alleged deficiency tax is barred by prescription.
RIZAL COMMERCIAL BANKING CORPORATION vs. COMMISSIONER OF INTERNAL REVENUE- Protest Tax
Assessments

FACTS:

RCBC received the final assessment notice on July 5, 2001. It filed a protest on July 20, 2001. As the protest
was not acted upon, it filed a Petition for Review with the Court of Tax Appeals (CTA) on April 30, 2002,
or more than 30 days after the lapse of the 180-day period reckoned from the submission of complete
documents. The CTA dismissed the Petition for lack of jurisdiction since the appeal was filed out of time.

ISSUE:

Has the action to protest the assessment judicially prescribed?

HELD:

YES. The assessment has become final. The jurisdiction of the CTA has been expanded to include not only
decision but also inactions and both are jurisdictional such that failure to observe either is fatal.

However, if there has been inaction, the taxpayer can choose between (1) file a Petition with the CTA
within 30 days from the lapse of the 180-day period OR (2) await the final decision of the CIR and appeal
such decision to the CTA within 30 days after receipt of the decision. These options are mutually exclusive
and resort to one bars the application of the other. Thus, if petitioner belatedly filed an action based on
inaction, it can not subsequently file another petition once the decision comes out.

BPI vs CIR
In order to determine whether the prescriptive period for collecting the tax deficiency was effectively
tolled by BPIs filing of the protest letters dated 20 April and 8 May 1989 as claimed by the CIR, we need
to examine Section 320[12] of the Tax Code of 1977, which states:

Sec. 320. Suspension of running of statute.The running of the statute of limitations provided in Sections
318 or 319 on the making of assessment and the beginning of distraint or levy or a proceeding in court for
collection, in respect of any deficiency, shall be suspended for the period during which the Commissioner
is prohibited from making the assessment or beginning distraint or levy or a proceeding in court and for
sixty days thereafter; when the taxpayer requests for a re-investigation which is granted by the
Commissioner; when the taxpayer cannot be located in the address given by him in the return filed upon
which a tax is being assessed or collected: Provided, That if the taxpayer informs the Commissioner of any
change in address, the running of the statute of limitations will not be suspended; when the warrant of
distraint and levy is duly served upon the taxpayer, his authorized representative, or a member of his
household with sufficient discretion, and no property could be located; and when the taxpayer is out of
the Philippines. (Emphasis supplied)

The above section is plainly worded. In order to suspend the running of the prescriptive periods for
assessment and collection, the request for reinvestigation must be granted by the CIR.

In BPI v. Commissioner of Internal Revenue,[13] the Court emphasized the rule that the CIR must first
grant the request for reinvestigation as a requirement for the suspension of the statute of limitations. The
Court said:

In the case of Republic of the Philippines v. Gancayco, taxpayer Gancayco requested for a thorough
reinvestigation of the assessment against him and placed at the disposal of the Collector of Internal
Revenue all the evidences he had for such purpose; yet, the Collector ignored the request, and the records
and documents were not at all examined. Considering the given facts, this Court pronounced that

The act of requesting a reinvestigation alone does not suspend the period. The request should first be
granted, in order to effect suspension. (Collector v. Suyoc Consolidated, supra; also Republic v. Ablaza,
supra). Moreover, the Collector gave appellee until April 1, 1949, within which to submit his evidence,
which the latter did one day before. There were no impediments on the part of the Collector to file the
collection case from April 1, 1949

In Republic of the Philippines v. Acebedo, this Court similarly found that

T]he defendant, after receiving the assessment notice of September 24, 1949, asked for a reinvestigation
thereof on October 11, 1949 (Exh. A). There is no evidence that this request was considered or acted upon.
In fact, on October 23, 1950 the then Collector of Internal Revenue issued a warrant of distraint and levy
for the full amount of the assessment (Exh. D), but there was follow-up of this warrant. Consequently, the
request for reinvestigation did not suspend the running of the period for filing an action for collection.
[Emphasis in the original
CIR vs Enron

Facts:

Enron, a domestic corporation registered with the Subic Bay Metropolitan Authority as a freeport
enterprise,[2] filed its annual income tax return for the year 1996 on April 12, 1997. It indicated a net loss
of P7,684,948. Subsequently, the Bureau of Internal Revenue, through a preliminary five-day letter,[3]
informed it of a proposed assessment of an alleged P2,880,817.25 deficiency income tax.[4] Enron
disputed the proposed deficiency assessment in its first protest letter.
Enron received from the CIR a formal assessment notice[6] requiring it to pay the alleged deficiency
income tax of P2,880,817.25 for the taxable year 1996. Enron protested this deficiency tax assessment.

Due to the non-resolution of its protest within the 180-day period, Enron filed a petition for review in the
Court of Tax Appeals (CTA). It argued that the deficiency tax assessment disregarded the provisions of
Section 228 of the National Internal Revenue Code (NIRC), as amended,[8] and Section 3.1.4 of Revenue
Regulations (RR) No. 12-99[9] by not providing the legal and factual bases of the assessment. Enron
likewise questioned the substantive validity of the assessment

Issue: Whether or not the assessment was valid

Held: NO

Section 228 of the NIRC provides that the taxpayer shall be informed in writing of the law and the facts
on which the assessment is made. Otherwise, the assessment is void.

It is clear from the foregoing that a taxpayer must be informed in writing of the legal and factual bases of
the tax assessment made against him. The use of the word shall in these legal provisions indicates the
mandatory nature of the requirements laid down therein.

Both the CTA and the CA concluded that the deficiency tax assessment merely itemized the deductions
disallowed and included these in the gross income. It also imposed the preferential rate of 5% on some
items categorized by Enron as costs. The legal and factual bases were, however, not indicated.

he advice of tax deficiency, given by the CIR to an employee of Enron, as well as the preliminary five-day
letter, were not valid substitutes for the mandatory notice in writing of the legal and factual bases of the
assessment. These steps were mere perfunctory discharges of the CIRs duties in correctly assessing a
taxpayer.[15] The requirement for issuing a preliminary or final notice, as the case may be, informing a
taxpayer of the existence of a deficiency tax assessment is markedly different from the requirement of
what such notice must contain. Just because the CIR issued an advice, a preliminary letter during the pre-
assessment stage and a final notice, in the order required by law, does not necessarily mean that Enron
was informed of the law and facts on which the deficiency tax assessment was made.

The law requires that the legal and factual bases of the assessment be stated in the formal letter of
demand and assessment notice. Thus, such cannot be presumed. Otherwise, the express provisions of
Article 228 of the NIRC and RR No. 12-99 would be rendered nugatory. The alleged factual bases in the
advice, preliminary letter and audit working papers did not suffice. There was no going around the
mandate of the law that the legal and factual bases of the assessment be stated in writing in the formal
letter of demand accompanying the assessment notice.